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Nadia International Market v. United States

United States District Court, D. Vermont

December 2, 2015



CHRISTINA REISS, Chief District Judge.

Plaintiff Nadia International Market brings this action pursuant to 7 U.S.C. § 2023(13) and 7 C.F.R. § 279.7 seeking judicial review of the April 2, 2014 decision by the United States Department of Agriculture (the "Agency") permanently disqualifying Plaintiff from the Supplemental Nutrition Assistance Program (the "SNAP Program"). Plaintiff, a food retailer located in Winooski, asserts that the Agency unfairly and wrongfully permanently terminated its participation in the SNAP Program and deprived it of its due process rights.

Pending before the court is Defendant United States of America's Motion for Summary Judgment. (Doc. 15.) Defendant argues that it is entitled to judgment as a matter of law because there are no genuine issues of material fact with respect to Plaintiff's violation of SNAP Program regulations and thus the Agency's decision to permanently disqualify Plaintiff was neither arbitrary nor capricious. Defendant further contends that the regulatory process and availability of judicial review satisfy Plaintiff's due process rights. Plaintiff opposes the motion.

The court heard oral argument on August 27, 2015, at which time the court granted Plaintiff's request to submit additional information through a Statement of Disputed Facts. On September 17, 2015, Plaintiff submitted a supplemental memorandum, an affidavit from Plaintiff's owner Yahya Ikhmayyis, and a statement that it objected to paragraphs 4 and 6 of Defendant's Statement of Undisputed Material Facts. Defendant submitted its reply on September 24, 2015, at which time the court took the matter under advisement.

Plaintiff is represented by Jasdeep S. Pannu, Esq. Defendant is represented by Assistant United States Attorney Melissa A.D. Ranaldo.

I. The Undisputed Facts.

A. The SNAP Program.

The Food and Nutrition Service ("FNS"), a division of the Agency, administers the SNAP Program, which allows qualifying households to receive monthly allotments to purchase eligible food items at authorized retail stores. Qualifying households receive their benefits through plastic Electronic Benefit Transfer ("EBT") cards that function like debit cards.

SNAP Program regulations prohibit authorized retail stores from "trafficking, " or exchanging EBT benefits for cash. FNS maintains a national database that records every EBT transaction at every authorized retail store throughout the country. It utilizes the "Anti-Fraud Locator using Electronic Benefit Retailer Transactions" ("ALERT") computer program to identify statistically unusual EBT transaction patterns and monitor compliance with SNAP Program regulations. Based on the contents of an ALERT report, FNS may open an administrative case, commence an investigation, and initiate an enforcement action against an authorized retail store. Enforcement actions may result in permanent disqualification from the SNAP Program.

B. The FNS Investigation and the Final Agency Decision.

Since November of 2010, Plaintiff has participated in the SNAP Program in the course of operating as an authorized retail store in Winooski, Vermont. In 2012, FNS commenced an investigation after Plaintiff's transactions appeared in ALERT reports from August 2012 through October 2012. The ALERT reports identified five categories of statistically unusual EBT transactions: (1) forty-two transactions ending in the same-cents value; (2) twenty-seven rapid sets of purchases (fifty-four total transactions) of multiple items by different households with timeframes ranging from fifty-one seconds to two minutes and fifty-one seconds between transactions; (3) twenty-eight rapid and repetitive transaction sets (fifty-four total transactions amounting to $4, 416.03) involving the same household with timeframes between transactions ranging from fifty seconds to twenty-two hours and fifty-one minutes; (4) thirty-six transaction sets by the same household that depleted the majority of monthly benefits in timeframes ranging from one minute and forty-one seconds to four hours and fifty-four minutes; and (5) fifty-two high-dollar transactions ranging from $172.13 to $552.99 and totaling $13, 777.17 that the ALERT program "considered to be excessively large given the size and inventory of the store." (AR 51-58, 63-69, 258-260.)

During the course of its investigation, FNS compared Plaintiff's EBT transactions with other similarly-sized authorized retail stores in Vermont. From August 2012 through October 2012, twenty-two stores were operating within a one-mile radius of Plaintiff, and twenty-eight stores were located within a one-to-two mile radius. The average EBT transaction at similarly-sized authorized retail stores within a one-to-two mile radius was $27.56, while Plaintiff's average EBT transaction was $40.18. For example, from August through October of 2012, Banadir Market, which is zero miles from Plaintiff and sells a comparable amount and variety of halal foods at similar prices, had average monthly EBT transactions of $6, 895.50. During the same time period, Winooski Halal Store, which also sells a comparable amount and variety of halal food at similar prices and is located half a mile from Plaintiff, had average monthly EBT transactions of $5, 054.69. Plaintiff's average monthly EBT transaction total of $16, 949.00 was approximately 2.5 times Banadir Market's average and 3.35 times Winooski Halal Store's average.

On October 16, 2012, a FNS field officer inspected Plaintiff's store, photographed the interior and exterior, and observed inventory, stock, pricing, the checkout area and process, and its physical layout. The FNS field officer reported that Plaintiff had one point-of-service ("POS") device, one cash register, no optical scanners, no conveyor belts, approximately ten hand-held shopping baskets, no shopping carts, two employees, and a checkout counter that was approximately four feet by three feet. Plaintiff did not sell hot food, sandwiches, or cold cuts and had no promotional pricing, specials, or packaged items. With the exception of lamb by the pound, Plaintiff did not sell bulk items. The three most expensive items in the store that qualified as eligible for the SNAP Program were a forty kilogram bag of semolina for $69.00, Nestle Instant Cream for $29.99, and lamb by the pound at $6.00 per pound, and the price of most items ended in ninety-nine cents. The FNS field officer spoke to Ahmed Arif, the store clerk, who stated that Mr. Ikhmayyis occasionally extends credit to a few customers but was unable to produce a ledger of such transactions. Based on the results of its site visit, the comparison to similar stores, and the ALERT reports, FNS determined that Plaintiff was engaged in trafficking of EBT benefits.

On November 28, 2012, the Operations Division of FNS notified Mr. Ikhmayyis in writing that Plaintiff had violated the SNAP Program regulation prohibiting trafficking based on EBT transactions that "establish[ed] clear and repetitive patterns of unusual, irregular, and inexplicable [SNAP Program] activity for your type of firm." (Doc. 15-2 at 1.)[1] The letter further informed Mr. Ikhmayyis that FNS was considering ...

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